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Thread: Putin Meets With Alexis Tsipras of Greece Amid E.U. Strains

  1. #31
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    Re: Putin Meets With Alexis Tsipras of Greece Amid E.U. Strains

    Quote Originally Posted by donsutherland1 View Post
    Argentina had a limited default (it continued to honor obligations with multilateral lenders e.g., the IMF) and worked out an agreed debt restructuring. The line of credit remained open with teh IMF. Nevertheless, it has remained locked out of global capital markets (which are separate from multilateral lenders), though in recent years, that outcome has been the result of two hedge funds. Unlike with corporate bankruptcies, there is no mechanism to compel those two funds to accept the terms that were accepted by the vast majority of Argentina's creditors. Under a corporate bankruptcy, there would have been sufficient creditor support to do so. Prior to its settlement with creditors, Argentina also faced a long-duration economic slump.

    Unless I'm mistaken, a larger share of Greece's debt is held by multilateral lenders than was the case with Argentina. Moreover, unlike with Argentina's simply abandoning its fixed exchange rate, Greece does not have a sovereign currency. The transition from the Euro to a Greek currency would entail risks of its own. Moreover, a Greek default would cut it off from IMF funding and its banks from ECB access. Those two factors would put Greece in a situation that was more challenging than what Argentina faced.

    So, while an Argentina-type outcome would be at least as plausible as the more benign outcome you sketched, a materially worse outcome would also be a distinct possibility, especially if the IMF and ECB cut off their financial support. Were the EU to strip Greece of access to the preferential trade terms of the Common Market, that would further exacerbate Greece's difficulties.

    Therefore, I'm not surprised that Greece has not pursued the default route. The rhetoric of the current Greek government is shrill, but its actions fall far short of that rhetoric. Even the current government, which is buoyed by public anger, is hesitant to take the kind of steps that could turn a bad situation into a potentially catastrophic one.
    I think that it would currently be more difficult than it might have been back in 2008. Therefore I am not so sure whether leaving the EU and abandoning the euro is something that they should pursue without funding that would allow them to pay their debt. I would need to have access to more information than I could put my hand on easily to make that assessment. That said, if they could secure such funding, I think it would certainly in their interests to do so. I say that being tied to the euro as they are makes it difficult to do the type of things that a sovereign currency would allow them to do such as monetize debt to a certain extent. The problem is that their is this huge differential in the the economies of the countries of the EU. Germany's economy is very different from that of Greece. Therefore having them tied into an economic union and a common currency in this way means that Greece will be at a disadvantage to Germany in terms of export capability. As such Greece will be in a disadvantaged position relative to Germany if they are forced to be in an economic union together and use a common currency.

  2. #32
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    Re: Putin Meets With Alexis Tsipras of Greece Amid E.U. Strains

    Quote Originally Posted by MildSteel View Post
    I don't think they still have to one in Syria. I could be mistaken.
    There seems to be a difference of opinion on that. While RT say it was evacuated the Ministry of defense says it is active.

  3. #33
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    Re: Putin Meets With Alexis Tsipras of Greece Amid E.U. Strains

    Quote Originally Posted by joG View Post
    There seems to be a difference of opinion on that. While RT say it was evacuated the Ministry of defense says it is active.
    Well, it would be of no surprise if it were still active. But honestly, I don't know. If you come up with something definitive, I would be interested in hearing it.

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